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NZ small businesses innovating for success

Hon Clayton Cosgrove
Minister for Small Business
10 December 2007 Speech

New Zealand small businesses innovating for success – Opening address at Canterbury Development Corporation’s 15th Hi-Tech Launch Programme Graduation Night

Venue: Hotel Grand Chancellor, Christchurch
Time: 6:20pm, Monday 10 December 2007

Good evening, and thank you for the invitation to formally open this graduation ceremony for the 15th round of the Canterbury Development Corporation Hi-Tech Launch Programme.

It is a pleasure to be here in my new capacity as Minister for Small Business, and as such, to be in the company of so many high-achieving members of the Canterbury business community.

As a Christchurch MP it is also very pleasing to see local technology companies recognising that in order to grow successfully, they need the sound business management practices and networking opportunities this course offers. As a former small business owner myself, I know the importance of having a solid platform to build on. Congratulations on taking this important step.

Specifically I would like to acknowledge;

o The Canterbury Development Corporation for its longstanding contribution to the development and promotion of the Canterbury economy, and for your foresight in designing and implementing the Hi-Tech Launch programme. In particular CEO Chris Pickrill and Business Support Manager John Hamilton.

o I am also pleased to note that the government has got behind this programme and to that end I would like to acknowledge Euan Purdie, Cate Hlavack and their teams at New Zealand Trade and Enterprise (NZTE); who have funded and supported the programme since its inception in March 2000.

o And the local industry: Canterbury’s technology industry has taken a great deal of responsibility for the development of its companies and provides invaluable support for the Hi-Tech programme, contributing to the selection panel and providing presenters, mentors and networking opportunities.

I commend you all for taking ownership of the future success of the local technology industry.

The origins of this Programme came from a demand for management training that was specific to the technology industry. What you have instigated is now recognised as the pre-eminent short course programme for small and emerging technology companies in New Zealand.

But the highest accolades this evening should go to the ten company owners, managers and staff members who are about to graduate from this Programme. I congratulate you not only on your hard work in successfully coming through 14 weeks of intensive learning, but also on the decision to seek this learning in the first place.

By enrolling in this programme, you have demonstrated your understanding of the fact that business success relies on knowledge of businesses processes, not just technical ability.

Your successful completion of this course puts you in a strong position to commercialise your ideas, and gives you the confidence to market these ideas to the world.

The government is also committed to supporting New Zealand business by sustaining an economy that is high value, high income, innovative and export-led.

To this end, the government’s “Economic Transformation” strategy does not differentiate businesses on the basis of their size, but on the basis of their growth potential.

‘Potential’ is where small businesses come into their own. Small and Medium Sized Enterprises, or SMEs, play a significant role in taking New Zealand to the world. Making up 96 per cent of New Zealand firms, it is not just their number but also their potential that makes them so important. They are sources of innovation and play a key role in the diffusion of new ideas and technologies.

As part of the Economic Transformation Agenda, the government is committed to growing globally competitive New Zealand firms - we have to if we are to grow into a high wage country. Innovation is a key component of that growth process.

So it is about innovation that I would like to talk with you this evening. It is something that we all acknowledge as important, but how much have we actually thought about what being ‘innovative’ means.

There has been a lot of new global thinking about the concept of innovation recently and a notion that I find particularly interesting is the distinction between what is called ‘discovery’ and what is called ‘mastery’.

“Discovery” is obviously about new ideas - new explanations, new products, or new processes. Discovery is what keeps humanity progressing. It is what scientists train for and it is why we employ them.

Increasingly though, the economic development literature is saying that although discovering is necessary, it is only the start of the journey.

"Mastery" is how to convert a new discovery into a commercially sustainable offering. It is not necessarily harder, but it takes a lot more time, burns a lot more money, and needs a lot more linkages if it is to be effective.

Our innovation system needs to not only generate new ideas, but to also promote the development, uptake, expansion and ultimately the commercialisation of our best ideas.

This is not just about creative product design; it involves resourcefulness and imagination in business processes: and in order to manipulate your business processes, you have to have an understanding of the rationale behind them.

For example, China now makes half the world’s motorcycles, mostly in one particular city, Chongqing. The designers, suppliers and manufacturers there have organised themselves into a dynamic and entrepreneurial network…born out of necessity.

According to a special report on innovation in The Economist (11 October 2007 edition), Chongqing’s private sector does not have access to big foreign partners such as Honda or Suzuki with a large amount of money and proven designs. So they came up with a business model on their own terms; one which was simple and more flexible than more traditional approaches.

Instead of dictating the detail of the parts they wanted from their suppliers, the motorcycle makers specify only important features such as size and weight, and let the designers improvise.

This approach has proven to be very successful, and has delivered big cost reductions and quality improvement.

Which brings me to another important point about innovation: it is a game in which you have to keep ahead.

To stay competitive within the global market, firms have to be able to innovate at the same rate as the rest of the world. And this rate is consumer-driven.

Customers now expect change and adaptation almost instantaneously. Product cycles are undeniably getting shorter. A recent study by Proctor and Gamble, the world’s biggest consumer-products firm, analysed the life-cycle of consumer goods in America from 1992 to 2002 (before the Internet’s full impact was felt). This study found that product life-cycles had fallen by half. That, the report concluded, meant that firms now need to innovate twice as fast.

So how are we doing in New Zealand?

At the request of the Ministry of Economic Development and the Ministry of Science Research and Technology, the OECD (Organisation for Economic Co-Operation and Development) conducted a review this year of the New Zealand Innovation System. The report pointed out many notable areas of strength, and showed that we have many of the conditions needed to encourage innovation and entrepreneurship, such as a favourable business environment thanks to our pro-competitive stance with policies that favour open trade and investment.

However, the report also highlighted some of the challenges we face in New Zealand such as insufficient broadband infrastructure, low business spending on research and development, and some shortcomings in the diffusion and absorption of technology.

These are challenges that the government is already addressing through policies such as:

o Our Business Tax Reform package announced in this year’s Budget. The package is aimed at raising productivity and improving competitiveness by providing incentives for our businesses to increase investment in innovation and to expand overseas. It cut the headline corporate tax rate from 33 per cent to 30 per cent and businesses investing in research and development are also eligible for a tax credit of fifteen per cent. This business tax package builds strongly on the $1.4 billion package of depreciation and other measures announced in Budget 2004;

o The New Zealand Digital Strategy and local loop unbundling to provide wider access to broadband;

o Aligning activities across the Ministry of Economic Development, the Tertiary Education Commission and the Ministry of Research, Science and Technology to provide better co-ordination of government support for research and development-based industries;

o And the government's Venture Investment Fund which has expanded export marketing assistance programmes and provides top level expertise to Kiwi firms in key offshore markets through the Beachhead programme.

You are all inherently innovative and entrepreneurial people; you have proven that with the successes you have had to date.

You are the ideas people and we, the government, support you through research grants, R&D tax credits, and by providing the infrastructure and the business environment into which you can confidently take your business vision; but you can only generate that vision for yourselves because it is to some extent unique to you.

It is government’s responsibility to provide an excellent business environment, so that those businesses that have what it takes to succeed, do so.

As a former small business owner myself, and also through my weekly visits to businesses in the Waimakariri Electorate, I am very aware of the issues that small businesses in New Zealand face. I look forward to continuing to work with smart people like yourselves to make New Zealand an even better place to do business and to help New Zealand SMEs realise their full potential.

Some of the key priorities for the government in achieving this include:

o Maintaining a quality regulatory environment that eliminates unnecessary compliance costs and minimises necessary compliance costs;

o Making transactions between SMEs and government agencies easier and enhancing communication between SMEs and government;

o Providing more enterprise education for school students and young entrepreneurs;

o And improving business and management capability

In the last two years the government has advanced these priorities. For example:

o The Quality Regulation Review, which is leading the improvements in the way government makes and administers business rules.

o The launch of the web portal – a one-stop-shop for business people to quickly find the information they need, to access relevant services and to find the latest information available from the wider business community.

o Streamlining of processes at Inland Revenue and the Companies Office so that businesses can now receive their company IRD number and GST registration online, within minutes of registering their company at the Companies Office website.

Such actions have seen New Zealand rated as the second easiest country in the world to do business in the World Bank Ease of Doing Business survey.

However, tonight belongs to those who are about to graduate.

Congratulations on your achievement, and for taking the important step towards securing your companies’ success. I look forward to hearing about your business success in the years to come. For, as I said at the start, your success is New Zealand’s success. We are a great nation, and with your help, a world-beating one.


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